26 May 2016
Online CBA: What is Guangdong’s Supply-side Reform Plan about?
Q: What is Guangdong’s supply-side reform plan about?
A: The Guangdong provincial government released the Action Plan on Supply-Side Structural Reform and Capacity Cutting (2016-2018) in 2016. The following are the main points of this plan:
1. Establishing a database for "zombie companies" and disposing of them category by category
Companies that are in deep waters but have good assets and market prospects will be given support in accelerating technical transformation, making use of new technology, process and materials and developing products that meet market demand and satisfy upgraded consumption. They will be helped to overcome financing difficulties, cut operating costs and speed up their transformation and upgrade through the granting of exemption or reduction of interest payment, temporary respite in the repayment of capital and interest, or exemption or reduction of fees of various types.
2. Phasing out delinquent companies
Companies (facilities or production lines) with excessive energy consumption and substandard products that fail to meet safe production requirements will be ordered to undergo rectification within a prescribed time, and will be shut down or banned in accordance with law if they fail to meet compliance requirements after rectification. Companies (facilities or production lines) with excessive emissions limits will be ordered to undergo rectification within a prescribed time and will be ordered to suspend operation or shut down if they fail to meet compliance requirements after rectification.
3. Strengthening co-operation with countries along the Belt and Road in the area of infrastructure
Companies will be given support in participating in the construction of smart cities, roads, railways, airports, ports and other infrastructure projects along the route.
Note: "Zombie companies" are no-hope companies that are kept alive with support from their creditors or the government.
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